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Direct Tax Code 2010 Key Changes Explained

The document summarizes key proposed changes in the Direct Tax Code of India. Some key points include: 1. Many tax exemptions for investments will be removed, including for ULIPs, equity mutual funds, term deposits, infrastructure bonds, principal repayment of home loans. 2. The tax saving investment limit remains Rs. 100,000 but an additional Rs. 50,000 is allowed for life insurance, health insurance, and children's tuition fees. The Rs. 1 lakh can only be invested in provident funds, superannuation funds, and pension funds. 3. The tax slabs and rates have been modified with rates of 10%, 20%, and 30% for annual incomes up to Rs

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Rajasekhar Kolla
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7 views2 pages

Direct Tax Code 2010 Key Changes Explained

The document summarizes key proposed changes in the Direct Tax Code of India. Some key points include: 1. Many tax exemptions for investments will be removed, including for ULIPs, equity mutual funds, term deposits, infrastructure bonds, principal repayment of home loans. 2. The tax saving investment limit remains Rs. 100,000 but an additional Rs. 50,000 is allowed for life insurance, health insurance, and children's tuition fees. The Rs. 1 lakh can only be invested in provident funds, superannuation funds, and pension funds. 3. The tax slabs and rates have been modified with rates of 10%, 20%, and 30% for annual incomes up to Rs

Uploaded by

Rajasekhar Kolla
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd

DTC removes most of the categories of exempted income.

Unit Linked Insurance Plans


(ULIPs), Equity Mutual Funds (ELSS), Term deposits, NSC (National Savings certificates),
Long term infrastructures bonds, house loan principal repayment, stamp duty and
registration fees on purchase of house property will loose tax benefits.

2. Tax saving based investment limit remains 100,000 but another 50,000 has been added just for
pure life insurance (Sum insured is atleast 20 times the premium paid) , health insurance,
mediclaims policies and tuition fees of children. But the one lakh investment can now only be
done in provident fund, superannuation fund, gratuity fund and new pension fund.

3. The tax rates and slabs have been modified. The proposed rates and slabs are as follows:

Annual Income Tax Slab


Up-to INR  200,000 (for senior citizens Nil
250,000)
Between INR 200,000 to 500,000 10%
Between INR 500,000 to 1,000,000 20%
Above INR 1,000,000 30%

Men and women are treated same now

4. Exemption will remain same as 1.5 lakhs per year for interest on housing loan for self-
occupied property.

5. Only half of Short-term capital gains will be taxed. e.g. if you gains 50,000, add 25,000 to
your taxable income.
Long term capital gains (From equities and equity mutual funds, on which STT has been paid)
are still exempted from income tax.

6. As per changes on 15th June, 2010, Tax exemption at all three stages (EEE) —savings,
accretions and withdrawals—to be allowed for provident funds (GPF, EPF and PPF), NPS (new
pension scheme administered by PFRDA), Retirement benefits (gratuity, leave encashment, etc),
pure life insurance products & annuity schemes. Earlier DTC wanted to tax withdrawals.

7. Surcharge and education cess are abolished.

8.  For incomes arising of House Property: Deductions for Rent and Maintenance would be
reduced from 30% to 20% of the Gross Rent. Also all interest paid on house loan for a rented
house is deductible from rent.
Before DTC, if you own more than one property, there was provision for taxing notional rent
even if the second house was not put to rent. But, under the Direct Tax Code 2010 , such a
concept has been  abolished.

9. Tax exemption on LTA (leave travel allowance) is abolished.

10. Tax exemption on Education loan to continue.


11. Corporate tax reduced from 34% to 30% including education cess and surcharge.

12. Taxation of Capital gains from property sale : For sale within one year, gain is to be added
to taxable salary.
For long term gain (after one year of purchase), instead of flat rate of 20% of gain after
indexation benefit, new concept has been introduced. Now gain after indexation will be added to
taxable income and taxed at per the tax slab.
Base date for cost of acquisition has been changed to 1st April, 2000 instead of earlier 1st April,
1981.

14. Medical reimbursement : Max limit for medical reimbursements has been increased to
50,000 per year from current 15,000 limit.

15. Tax on dividends: Dividends will attract 5% tax.

15. Bad news for NRIs : As per the current laws, a NRI is liable to pay tax on global income if
he is in India for a period more than 182 days in a financial year. But in new bill, this duration
has been changed to just 60 days.
This is very unfair to Seafarers. To avoid any income tax, an Indian sailor employed with a
foreign ship will have to stay maximum for 60 days in India.

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